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India government encourages retail-producer tie-ups

Delhi, India: The Indian government may give domestic retailers incentives to source from local grower cooperatives and invest in their supply chains

The Indian government is discussing ways to encourage local retailers to step up investment in supply chains and make the retail sector more conducive to foreign direct investment, reports the Economic Times of India. Ministers are considering a scheme that offers incentives to domestic organised retailers if they tie up with farmer cooperatives or agricultural firms to improve back-end operations, such as cold chain facilities.

Such a move would benefit leading Indian retailers like the Future Group, Bharti and Reliance, the paper said, as well as reduce produce wastage and keep food price volatility in check. The government is also open to amending laws governing retailer sourcing, such as the Agriculture Produce Market Committee (APMC) Act.

“We are exploring de-listing fruits and vegetables, for one, from the APMC Act to allow these retailers to benefit 25-30%from the value chain by cutting down wastage and dealing directly with producers,” one official told the Economic Times. Ministers reportedly discussed these plans last week. They believe such changes could pave the way towards opening the retail sector to foreign direct investment, the Economic Times said.

“Organised retail involves big players and the terms of bargaining will be unequal,” the official told the paper. “So, what we need is a policy change so that farmer cooperatives or farmer companies, and not individual farmers, enter into agreements with them to reinforce back-end operations. On their part, retailers will want to deal with scale and not individual farmers.”

Although the exact nature of the retailer incentives were not decided at last week’s meeting, suggestions included tax benefits for retailers and government investment in farmer companies, according to the report.